MarketWatch: New SEC Ad Rules Would Give Hedge Funds Unfair Advantage

By Teresa Rivas

The Securities and Exchange Commission is mulling changes to its rule banning hedge funds from advertising, but in their current proposed form, the change could give hedge funds the ability to market their products without the constraints placed on mutual funds.

That’s according to MarketWatch’s Ian Salisbury, who writes that “the famously risky and complex investment pools would be free to advertise some bold marketing claims that much more humdrum mutual funds are forbidden from making.” He cites regulations requiring mutual funds to calculate yield and returns in very stringent, controlled way, which hedge funds wouldn’t necessarily have to follow.

Of course, that’s not to say that hedge fund will have free reign to misrepresent themselves: They will have to comply with anti-fraud laws that cover all investors as well as regulations covering investment advisers.

The rule changes come at the behest of Congress, which earlier this year passed the JOBS Act. Part of that legislation behooves the SEC to lift advertising restrictions to start-ups and other less traditional investment vehicles, from private equity to venture capital and hedge funds.

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